The role DNA methylation plays in the promoter regions of two separate gene systems has been clarified. Demethylation of at least one Hpa II restriction site upstream from the structural coding sequences of human gamma globin or the hepatitis B core antigen gene is necessary but not sufficient for the initiation of transcription. The final conversion of a quiescent, demethylated gene (gamma globin or hepatitis B core antigen) to an active state requires some endogenous or exogenous inducing agent, which may be highly specific for any given gene or gene complex. Clonal selection is not responsible for observed changes in gene expression, since we have clearly shown that cells remethylate DNA that has been demethylated by 5-azacytidine treatment. New micro techniques have been developed which enable the analytical quantitation of 5-methylcytosine in less than one microgram of DNA isolated from any source. Thus, the genomic 5- methylcytosine content of normal human bronchial epithelial and pulmonary mesothelial cells has been measured for the first time. These techniques have enabled the determination of changes in the genomic content of 5-methylcytosine during normal physiological processes. The genomic content of 5-methylcytosine in normal human bronchial epithelial cells and in rodent tissues decreases with increasing in vivo age. Significant decreases in DNA 5-methyl- cytosine occur concomitantly with the induction of squamous differentiation in normal human bronchial epithelial cell cultures. These techniques have also provided for the demonstration that chemical carcinogens can induce decreases in DNA 5-methylcytosine levels in dividing normal human bronchial epithelial cells.